Corbett seeking a price for state liquor stores

Governor asks consultant to study privatization figures

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HARRISBURG -- Gov. Tom Corbett's administration took a preliminary step toward privatizing the sale of wine and spirits in Pennsylvania Tuesday, as an outside consultant began an analysis of the 620 state-owned and operated liquor stores.

The study by Philadelphia-based Public Financial Management could take until July. It's one of several moves aimed at privatizing, or at least modernizing, the liquor system, which dates to the end of Prohibition in 1933.

Mr. Corbett has said he wanted to get the state out of the liquor-selling business, arguing it's not a "core function" of government. PFM, which is one of the Pittsburgh's Act 47 managers, was already on retainer with the state, a contractual relationship begun under Mr. Corbett's predecessor, Gov. Ed Rendell. It was unclear Tuesday what PFM would be paid for the study.

One aspect of the study is likely to be a highly disputed point -- how much money the state could get from auctioning licenses for the liquor stores to private operators. The United Food and Commercial Workers, a union that represents many of the clerks in state stores, differs sharply on this point with proponents of privatization, such as House Majority Leader Mike Turzai, R-Bradford Woods.

Mr. Turzai said Tuesday that by May he would introduce House Bill 11. It would permit an auction of licenses for the 620 existing liquor stores, along with 130 new ones, to private owners. The exact details of his privatization proposal will likely depend on what the governor's study turns up, he added.

"The governor and I are committed to having the private sale of wine and spirits," Mr. Turzai said.

Meanwhile, the three-member state Liquor Control Board asked a House committee Tuesday for bills that the board said would improve the system's operations and lessen, if not stop, any need for privatization. They include:

• Allowing expansion of Sunday store operations. Currently no more than 25 percent of the 620 stores may be open, and only from noon until 5 p.m. The board would like more stores open and perhaps as late as 8 p.m.

• Permitting direct shipments of wine from wineries to buyers' homes, rather than, as now, having to ship it to state liquor stores for pickup. The board wants to be sure that underage teens cannot, however, order wine via phone or the Internet, and wants to ensure that all state taxes are collected on the wine.

• Creating flexibility in pricing by lifting the current, flat 30 percent markup imposed on every bottle of wine and spirits sold, in order to give the board power to vary the price markup "between a $7 bottle of wine and a $500 bottle of champagne," as LCB chairman P.J. Stapleton put it.

• Increasing efforts to lessen "border bleed" -- a problem that exists mainly in southeast Pennsylvania, where Pennsylvanians who work or vacation in Delaware or New Jersey go there to buy liquor because of better prices.

But Mr. Turzai said such limited moves by the LCB were "too little, too late," and wouldn't make him change his mind about privatization. "Bureaucrats want to protect their turf. They want to keep the status quo, but they're misguided. We have to move into the 21st century," Mr. Turzai said.

Rep. John Taylor, R-Philadelphia, chairman of the House Liquor Control Committee, said his panel could consider some of the LCB-sought bills by June.

Rep. Doug Reichley, R-Berks, tried, but failed, to make Mr. Stapleton concede that he opposed privatization. Mr. Stapleton would say only, "I favor modernization" of the system, adding his job was simply to present accurate data to legislators to help them make up their minds.

Wendell Young of Local 1776 of the United Food and Commercial Workers, which represents 3,000 of the 5,700 LCB workers, vowed to fight privatization, saying the current system does a better job of keeping alcohol out of underage youths' hands and of generating revenue for the state. He said clerks in state stores were diligent about checking IDs of purchasers. He argued that some of the $400 million in taxes that the LCB gives annually to the state treasury, plus another $100 million in profits, would be lost if private operators ran the stores.

He also disputed Mr. Turzai's estimate of a one-time infusion of $2 billion for the state if 850 licenses -- 750 retail licenses and 100 wholesale licenses -- were auctioned to private operators. Mr. Young said studies had shown the figure would be closer to $300 million, but Mr. Turzai stuck to his estimate.